Ppp in israel 2009

Ministry of Finance The Division of PPP Projects

Public Private Partnership DivisionPublic Private Partnership Division

Inbal Insurance Company LtdInbal Insurance Company Ltd..

September 2011September 2011

PPP projects in IsraelPPP projects in Israel

Ministry of FinanceMinistry of Finance2 The Division of PPP Projects

VisionVision

Investments in infrastructure would enable to sustain Israel’s economy growth

Private sector’s involvement would improve level of government’s supplied services

Optimizing risk allocation between the public and the private sectors would contribute to public wealth


Industries under FocusIndustries under Focus

Railroads/Mass Transit Systems

Roads

Water desalination and sewage treatment

Construction

Energy (IPP; LNG; Solar)

The government has decided to focus primarily on

the following industries:


PPPPPP

PPP/PFI –PPP/PFI – Major issuesMajor issues

PPP/PFI In IsraelPPP/PFI In Israel


Governmental body

Authorities Involved Along the ProcessAuthorities Involved Along the ProcessAuthorities Involved Along the ProcessAuthorities Involved Along the Process

Inter-Ministerial Inter-Ministerial Tender CommitteeTender Committee

The Tender

Steering Committee

Designated Company

Concession Agreement Management

Ministry of FinanceRelevant Government Ministries

Inbal – The Division of PPPExternal Consultants

WDA, JPTA, CTA

Cross Israel Highway,

Tel Aviv Mass Transit


Contractual Framework(Limited or Non-Recourse Structure)Contractual Framework

(Limited or Non-Recourse Structure)

Government

Project vehicle (SPC(

Operating Agr.(O&M (

Construction Agr.(EPC)

Lender(s)Financial Facility

Sponsor(s)Equity


Project Feasibility Study Project Feasibility Study

Project is economically

feasible

Project meets PPP/PFI criteria

Phase 1 - economic

feasibility study:Cost/benefit

analysis

Phase 2 - prior to and

during tender process

Phase 3 -

decision & implementation

No

No

Yes

Yes

Project will not be implemented

Public sector implementation

using alternative method

החלטת ממשלה

Analyzing the bids compared

to the PSC

Yes

Signing a concession agreement

&Controlling its

execution

Business environment fits

PPP/PFI

No

Yes


Typical Risk Allocation Optimal Risk Allocation – each sector is responsible for the risks he can better

mitigate

Typical Risk Allocation Optimal Risk Allocation – each sector is responsible for the risks he can better

mitigate

Risk Public Private SharedTechnology

Land acquisition & Expropriation

Detailed design

Cost overruns

Completion delay

Archaeological findings

(mainly Public)

O&M costs

Collection risk

Force Majeure

Discriminatory change in laws and legislation

Political risk

Market/Demand risk


Typical PPP/PFI project Time FrameTypical PPP/PFI project Time FrameExcluding legislative related delays

Project stageProject stage Time Frame (Months)me Frame (Months)

• Appointing Tender Committee/Consultants 1• PQ Documents 3-4• Bidding the PQ 3• List/Short List after PQ 1• Tender documents 2• Bidding of Tender 4-6 • Tender process 1-2 • Best & Final 1-2• Sub Total 16-20

• Financial close 8-12

• Total 24-32


Improvements in the Tender RulesImprovements in the Tender RulesChanges and improvements in the Tender Rules in order Changes and improvements in the Tender Rules in order

to facilitate the implementation of the projects: to facilitate the implementation of the projects:

Unified accounting principles (based on IASB). Easing of tax treatment Interest rate changes protection Various indexation and protection options in accordance,

to risks at the different project stages

Steps to encourage institutional investors to participate in the Steps to encourage institutional investors to participate in the PPP financingPPP financing :

Indicative Rating to the projects (by Israeli rating co.) Refinance option after Construction phase


Encouraging foreign ParticipationEncouraging foreign ParticipationWhy foreign participation is needed?Why foreign participation is needed?

• Single borrower limitation (15%)Single borrower limitation (15%)

• Low competition (2 major banks) Low competition (2 major banks)

– Equity: NIS 54B for the big 5; NIS 37B for the big 2.Equity: NIS 54B for the big 5; NIS 37B for the big 2.

– ROE: 13.1% - 22% (9/2006 - big 5)ROE: 13.1% - 22% (9/2006 - big 5)

• 7-8 major groups participating in all government projects7-8 major groups participating in all government projects

Improvements in order to facilitate the participation of foreign Improvements in order to facilitate the participation of foreign bidders and foreign Lenders: bidders and foreign Lenders:

Foreign interest rate changes protection.

Foreign currency changes protection.

Various indexation and protection options in accordance, to risks at the different project stages

Payments to Concessionaire in foreign currency


Foreign Entities participationForeign Entities participation

• Technical Know-How

Bring professional expertise and experience.Bring advanced technologies. Bring more efficiency in the planning and

execution of projects. Improving the capability of Israeli entities.

• Investment

Partnership between Israeli and foreign entrepreneurs.

Enlargement of foreign investments.


Foreign Entities InvolvementForeign Entities Involvement

• Financing

Israel’s sovereign rating ( A – A+ ) attractive for international finance entities.

Improvements in Tender Rules encourages foreign participation : financing in USD / Euro with interest rate protection, various indexation protection at the different project stages.

Help to enlarge number of financing entities (single borrower limits for Israeli banks).

Stimulate competition – reduce financing costsOffer new financing tools and solutions


PPPPPP

PPP/PFI – Major issuesPPP/PFI – Major issues

PPP/PFI In IsraelPPP/PFI In Israel


Volume of Operation by SectorsConstruction costs

Volume of Operation by SectorsConstruction costs

Transport: $ 6.3 billion

Water: $ 2.0 billion

Construction: $ 0.3 billion

Energy : $ 1.4 billion

Total $ 10 billion

63%

20%

3%

14%

Transport Energy

Water Construction


Railways

Cross Israel Highway (H-6)

Carmel Tunnels

Roads No 431 + 531

Fast lane

Desalination facilities

Prison, Police National Academy

Solar Plants, LNG

Main PPP Projects Main PPP Projects in Israelin Israel

LRTs

Army Training Basis City


Status of PPP ProjectsStatus of PPP Projects

Transportation Projects Status Foreign Entities Involvement

Cross-Israel Highway - Central Section

In operation Both in the operation and in the financng of the project.

Highway 431 In operation Financing of construction phase: HSBC (together with 3 Israeli banks)

Cross-Israel Highway – Section 18

Construction – work began in June 2007 and is expected to be completed by September 2009.

Both In the operation part and in finance part


Status of PPP ProjectsStatus of PPP ProjectsTransportation Projects Status Foreign Entities

Involvement

Tel Aviv and Jerusalem Fast Lanes

Construction – Construction work began in August 2007 and is expected to be completed by the first quarter of 2010.

“Siemens” is a subcontractor responsible for the unique toll system

Jerusalem LRT Construction – Construction work began in August 2006 and is expected to be completed by the third quarter of 2010.

A French company (“ALSTOM”) holds 20% share in consortium

Tel Aviv LRT Financial Closing – expected to be completed in April 2009.

“Siemens” is part of the concessionaire. Financing of construction phase: RBS, Bayerische LB, KFW



Transportation Projects Status Foreign Entities

Involvement

Carmel Tunnels Construction –work began in November 2006 and is expected to be completed by the end of 2010.

A Chinese company (“CCECC”) is involved in the tunneling works

Highway 531 Financial Close –to be completed in July 2009.


Cross Israel

Highway

531

Tel Aviv

Ayalon

HW-20

Geographic location:

The ring roads The ring roads around the Tel Aviv around the Tel Aviv metropolitan area :metropolitan area :

NorthNorth - 531 - 531EastEast - Cross Israel - Cross Israel

(Hw 6)(Hw 6)SouthSouth - 431 - 431WestWest - - Ayalon Ayalon

(Hw 20)(Hw 20)431


Status of PPP ProjectsStatus of PPP ProjectsDesalination Projects Status Foreign Entities

Involvement

Ashkelon (100 m3/year) In operation A French company (Veolia Water ) is part of the consortium(50%)

Palmachim (30 m3/year) In operation

Hadera (100 m3/year) Construction - construction of the facility will be completed by the end of 2009.

Financing of the project : Calyon Bank , EIB, Espirito Santo Bank, Dexia Bank, KFW.

Sorek (150 m3/year) RFP released in January 2009. Proposals to be submitted in June 2009

Foreign companies are part of bidding groups


036

100 130 145 160280 305

405505

Development of sea water desalination plants in Israel along the national system

(100)

(30)

(100)

(100)

Tendering stage

Full production Since 12/05

Construction phase. Production at 12/09

(150) SorekFull production

Since 9/07

Tendering stage

Hadera

Palmachim

Ashdod

Ashkelon



Energy Status Foreign Entities Involvement

Solar Power Plants in the Negev Desert

RFP for 2 Thermal power plants released in March 2009PQ for Photovoltaic plant expected to be released in April 2009.

Foreign companies are part of bidding groups.

LNG PQ to be released pending Government approval.



ConstructionProjects

Status Foreign Entities

Involvement

Beer Sheva Prison Construction - construction of the facility will be completed by June 2009.

The operational company is going to be foreign

Courts, Government Center Parking Lot, Knesset expansion

In operation

Training Center for The Israeli Police PQ –bids were submitted in June 2008.

RFP expected to be released in Q3/09

Foreign participant part of bidding group.

Ashdod Hospital PQ – bids were submitted in December 08.

RFP expected to be released in Q2/09


Expected additional ProjectsExpected additional Projects

Additional Roads & LRT lines (Tel-Aviv) including T/K &

Build/Design projects

Additional Desalination Facilities

Hospitals (Including hotels, parking areas, shopping malls)

International Airport in Megido

Education (school PFI)

An international airport and the Peace CorridorPeace Corridor projects

(Coordination with Jordan)

Additional renewable energy projects

Protection of the Environment ( a committee has been appointed

to make a preliminary study of potential projects )


Thank you for your attention


ContactsContacts

Mr. Abraham TenneHead of Desalination Division and chairman of the WDATel : 972-3-6369688/676Mobile : 972-50-6221342E-mail :[email protected]